Accounts Receivable Insurance

Published: | Updated: September 17, 2016

Definition - What does Accounts Receivable Insurance mean?

Accounts receivable insurance is a type of commercial insurance that protects businesses in the event that sums of money customers owe are not paid. This may be because customers simply are not paying or because critical records within the company itself sustain damage that renders them unusable.

Insuranceopedia explains Accounts Receivable Insurance

If a fire starts in a commercial property and destroys the accounting records, then the company may lose track of critical business information. In this case, it may not be able to bill its customers or determine who has or has not paid and the amounts owed. Accounts receivable insurance protects against this type of loss. Businesses can also receive substantial losses if key customers do not pay or pay late. For instance, if an engine manufacturer sells several worth $20,000 each, it could be in trouble if customers default or are late on payments. Accounts receivable insurance would protect against these types of losses as well.

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